The Pointlessness of Signing After the Draft

Nelson Cruz got tired of unemployment and signed a one year, $8 million deal over the weekend, taking nearly half of the salary he turned down when the Rangers made him a qualifying offer back in November. However, according to agents Scott Boras and Bean Stringfellow, fellow remaining free agents Ervin Santana, Kendrys Morales, and Stephen Drew aren’t particularly interested in following in Cruz’s footsteps, and are even openly talking about waiting until after the June draft — when they will no longer have compensation picks attached — before signing a new contract. The theory is that, without the encumbrance of draft pick tax, teams would be lining up to sign these players.

There’s a problem with this theory, however; the math simply doesn’t work. Over at MLBTradeRumors, Tim Dierkes did a great job laying out the picks that each team would have to surrender if they signed any of the remaining qualified free agents. He also helpfully included the pool amount allocated to each pick, so we can see that the exposed draft pick “values” range from $2.8M down to $600K.

Now, because the flow of cash into the draft is restricted, draft dollars are worth more than their face value. Any team wanting to acquire draft pool allocation has to pay more than $1 for $1 in order to do so, since draft dollars are a limited resource relative to a team’s access to capital. Last summer, the Dodgers essentially bought $210,000 in international spending money — limited to some extent the same way the draft dollars are — by taking on $500,000 of Carlos Marmol‘s salary, putting a 2.4X valuation on those international dollars.

Draft dollars are probably worth more than international spending dollars, since the penalties for blowing your international budget out of the water aren’t as severe as ignoring your draft budget. In conversations with people in MLB front offices, the general consensus has ranged around a 3X valuation for draft pick dollars, so a pick with a slot value of $2 million would be worth $6 million in open market dollars. This hypothesis is supported by transactions like the Bud Norris trade, where the Orioles gave up a pick — currently slotted in at #37 — for a moderate value arm, as well as the difference in contracts signed by the similar-ish free agent starters this winter. Picks certainly have value, especially in the #10 to #20 range, but teams are willing to trade that value for the right price, and that right price seems to be around three times the value of the pool allocation.

Take Nelson Cruz, for instance. When the Orioles 1st round pick — #17 overall, $2.2M slot value — was on the line, they weren’t willing to sign him, even for the 1/$8M he eventually agreed to. With a 3X valuation on that pick — which would make the pick worth $6.6 million — that would have made the true cost of signing him 1/$14.6M, or basically the same valuation as the qualifying offer. Once they signed Ubaldo Jimenez and Cruz’s signing only cost them the 55th pick — which has a slot bonus of $750K, and a 3X valuation would make that pick worth $2.2M — they agreed to terms on a deal that valued Cruz at just over $10M. Essentially, signing Jimenez made Cruz roughly $4 million cheaper for the Orioles, which was enough to push them to make a deal.

So, let’s get back to the threat of waiting until after the draft to sign. At the very top end of the exposed pick range, the value of the potential lost picks, using a 3X multiplier, would be around $8.3 million. That’s the added cost to the Brewers of signing any of the remaining qualified free agents, and is certainly a reason why the team pursued Matt Garza instead. But teams like the Brewers, Padres, and Giants aren’t really rumored to be the teams negotiating with qualified free agents at the moment.

Stephen Drew’s primary suitor seems to be the Mets, whose exposed draft pick is worth just $1.9M after applying the multiplier. The Mariners ($2.3M) have been linked to both Kendrys Morales and Ervin Santana. The Rockies ($4.9M) apparently have some interest in Santana, but not at his current asking price. The Orioles ($1.8M) are still being linked to Santana even after signing Jimenez. The Blue Jays ($3.5M) seem like they’re out on Santana, even though they have been linked to every available starting pitcher this winter, it seems. Of the clubs rumored to be interested, the magnitude of the draft pick tax is just not that high.

And there’s almost no way that the player would come out ahead by waiting until after the draft versus just taking a reduced salary equal to the team’s draft pick tax. By waiting to sign until June 8th, when the draft has completed, the players would be sitting out approximately 40% of the season; the Blue Jays play 64 games between Opening Day and June 8th, for instance. Because players who sign mid-season are only paid a pro-rated amount of the annual salary they agree to, it’s almost certain that 40% of the player’s 2013 salary will be larger than the draft pick tax of any interested teams.

For instance, if Santana is seeking a $50 million deal for four years, just like every other free agent hurler, he’s asking for a $12.5M salary in 2013. By sitting out 40% of the season and signing that exact same deal on June 8th, he’d earn a total of $7.5 million in 2014, meaning that sitting out the first two months of the season would cost him $5 million in salary. He’d be better off just giving that $5 million discount to the interested teams and pitching the entire season, since that $5 million discount is likely to be larger than any of the interested teams valuations on the pick they would lose to sign him.

Realistically, I just don’t see any real advantage to the player for sitting out two months of the season. At the prices they believe they’re worth, two month’s salary is probably more costly than the draft pick tax. It’s one thing to wait until after Opening Day to avoid receiving a qualifying offer next season — if Ken Rosenthal’s report is correct and players can avoid a 2015 QO by signing after April 1st — but sitting out until June in hopes that big offers will come rolling in once the pick expires just seems to overstate the value the teams are actually putting on the picks that are at-risk.




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Dave is a co-founder of USSMariner.com and contributes to the Wall Street Journal.

98 Responses to “The Pointlessness of Signing After the Draft”

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  1. pinch says:

    Bean Stringfellow

    what
    what
    oh my word that is an amazing name
    scott boras is no longer the best agent in the world

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  2. tehzachatak says:

    isn’t the multiplier likely to be very different for different teams?

    e.g., aren’t draft picks much more valuable to some organizations (i suppose those with financial constraints, e.g. the Mets), and less valuable to others?

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    • ian says:

      I imagine it would be difficult to quantify a team’s willingness to spend money. I think the best you can (and maybe should) do it put out the draft multiplier and then look at the team’s context to see if it makes sense for them given whatever weird issues that particular team has.

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    • Matt says:

      This is a good point, but at the same time, if a draft pick is worth X amount of excess value, it shouldn’t matter what the team’s payroll really looks like. If the Yankees can generate $10M of excess value with a first-round pick, then they can spend that money elsewhere (while a team like the Rays might simply save it). I understand that in practice this may play a role, but probably only with the 2-4 teams on each extreme.
      The competitiveness of the current team, however, should be an important part of the “value”. The Rangers might be willing to trade $10M of future value for a few market-value wins for their team over the next few years when they’re trying to win. A rebuilding team who isn’t likely to compete over the next year or two would rather have the potential for excess value 3+ years down the road when they’ll be at a higher leverage position in the win curve.

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  3. Fargle Bargle says:

    This seems to assume a 1 year deal is the only option by waiting till June. But what if by sitting out until June, Ervin gets a 4/45 deal instead of 4/50 with the prorating of 2014? If signs now for 7.5m, he would need to be sure he could get 3/37.5 next year to end up in the same spot. Isn’t there something to be said for the certainty of getting those 3 years now?

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    • Nathaniel Dawson says:

      Read the article again. Dave’s just saying Santana would only get $7.5 on the first year of the 4 year deal, instead of $12.5

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      • Matt P says:

        Read the comment again.

        If Santana gets a prorated portion of 12.5 million his first year (i.e 7.5 million) and then gets 3 more years at 12.5 million, then he’d be in better shape doing that than getting 1 and 10 (plus another QO the next year).

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        • The Ancient Mariner says:

          Read the article again. To repeat, Dave didn’t say anything about Santana only signing a one-year deal. Fargle Bargle did, but only because he misread Dave.

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      • Matt P says:

        Actually, I’m wrong. My fault.

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  4. Fargle Bargle says:

    And really, he probably gets a better long-term deal than 4/45 if he waits till June.

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    • Owen says:

      If he would get that without the pick, why can’t he get anything close to that with the pick? Maybe a key suitor with a high unprotected pick gets in there, but for most teams, that pick isn’t so valuable as to suddenly make Santana a hot commodity once the pick is gone.

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      • AK7007 says:

        “Hot stove league” – We just don’t know how irrational some GMs might get if in their future words “a top-flight starter” is available near the middle of the season for just money. It might be a crazy over the top money-fest, or Santana might find that budgets are basically set in stone at the start of the season, and GMs just aren’t going to shell out money for a guy who hasn’t touched a baseball since the previous September.

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  5. Inspector Gadget says:

    “He’d be better off just giving that $5 million discount to the interested teams and pitching the entire season[...]”

    This part confuses me. Why would he be BETTER off pitching the entire season for 7.5m than pitching 60% of the season for 7.5m? I think at most you could argue that he would be no worse off.

    Everything else in the article makes sense, and I think it’s clear that waiting until after the draft is just posturing on the part of the agents.

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    • larry says:

      well how effective will can any of these guys hope to be only playing for half a season? they miss ST and wont see actual competition til June. They might come in ready to play but they might need another month before they are can face MLB competition.

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    • ralph says:

      Well, if these guys actually care about making it the postseason, I assume the players would understand that giving a team a full season of its services should make it more likely that the team make the playoffs.

      But I don’t think Dave really takes into account that there may not be much of a discount waiting until June to sign. Say a couple teams lose an important pitcher due to injury — all of a sudden you have a guy who you can sign without losing a player or pick for your organization, which might create a bidding war that overcomes the implied pro-rate discount.

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      • Eddie Bird says:

        What if they care about the postseason, but are indifferent to what team gets them there (as long as they pay)?

        Sit out until June, then sign with a team that looks like they have a good shot at the playoffs but might need one more addition.

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    • Jefftown says:

      I had to run this sentence through the Rube Goldberg machine that is my brain a few times, too.

      Is the following a better way of putting it?

      “Other things equal, he would make more money accepting an offer *now* that is discounted by the draft pick valuation than waiting until after the draft and foregoing $5 million, especially if a team happens to value that pick at less than 3X the slot value.”

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    • chuckb says:

      I agree. I kind of got lost there.

      But if he gave the $5 million discount to the teams spread out over the length of a 3 or 4 year deal — by accepting an $11 M contract, for example, then he’s better off due to the time value of money.

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    • The Ancient Mariner says:

      Having the certainty of signing now, presumably.

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  6. stan says:

    While it is clear that MLB draft dollars are worth more than a “real” dollar, using the Dodgers’ Marmol trade as a valuation point is misleading. They are the team that is most likely to overspend on literally everything at this point and that is especially true for transactions that allow them to spend more on intl. free agents since they are closer to MLB-ready. It would be fairer to say that a 2.4:1 ratio is the maximum a team would pay for a draft dollar.

    There were four other trades involving intl. free agent pool dollars that don’t show anything like the 2.4:1 ratio the Dodgers paid.

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    • stan says:

      You also have to take into account that Marmol was worth *something* to the Dodgers. They did pitch him for 20 innings after the trade and get some nominal use out of him. As talented as he is, it was certainly worth their time to see if they could turn him into a good set-up man. The Marlins gave him $1.25M this offseason, so again, he is worth *something*.

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    • Nathaniel Dawson says:

      International free agents that the Dodgers can sign with that pool money are very far away from the majors. They’re typically 16, maybe 17 years old.

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  7. Matt K says:

    way to drop a bomb at the end of your last paragraph….

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    • stan says:

      Given how tough it has been for these guys to get a decent offer, it seems highly unlikely that they are worried about getting a QO again next offseason. They all seem to just now coming to the realization that they are not all that marketable if their are old, injury-prone and inconsistent.

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    • tz says:

      But it may help them to get a 1-yr “pillow” deal, with the signing team getting some comfort that the guy is playing for an unrestricted payday in the 2014-2015 offseason.

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    • Nathaniel Dawson says:

      If anything, sitting out past opening day would lower their value to a team, since the team would have no hope of getting back a draft pick for them the next year. So it’s nice for a player to know he can’t be given a QO if he signs a one-year deal, but it makes him a bit less attractive to teams for that very reason.

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  8. Resolution says:

    Well, doesn’t it make sense to do so if sitting out the first 40% allows you to then snag what is essentially a 2.6 or 3.6 year contract?

    Also, it could make sense for pitchers with injury histories (or just pitchers in general) to further rest their arms/workout during the season in a way that is less taxing…

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    • Richie says:

      This. Especially for a starting pitcher, a couple of months less wear-and-tear on the ol’ arm? That sounds pretty good to me.

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    • Belloc says:

      Right. Because pitchers never suffer injuries in March, April or May.

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    • Mr Punch says:

      This makes sense to me in some cases. Stephen Drew, for instance – some team that thinks it’s set at SS now may be desperate by June, and be very willing to fill the hole just by spending money. If there are two such teams, a multiyear deal could well happen.

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      • db says:

        Or, teams may have better performance than they thought, no injuries or a set budget by June. The idea of sitting out for a better offer is bluster and is probably not true and a bad idea.

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  9. Atreyu Jones says:

    I’m not sure the estimates of how much teams value the picks are sound. All the estimates I’ve seen elsewhere are higher than in this article.

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    • Atreyu Jones says:

      For instance, this article estimates that the value of an unprotected first round draft pick ranges from $10-25m: http://www.fangraphs.com/community/the-draft-pick-compensation-paradox/

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      • Johnnytwotimes says:

        Right. Dave’s way off on this one. If the O’s had to give up there first round pick to sign Cruz, there is no dollar value that would be worth signing him at. This article completely misses the boat. Roughly 75 % of teams will not consider signing these guys at any price. It’s not as simple as Ervin Santana just telling teams he’ll take a 6 mil discount and them the floodgates open.

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      • pft says:

        That article is very flawed because they don’t take into account development costs, and he also went into his study already convinced it should be higher than reported, so was not an objective study.

        The BBTFF article sited says 7.17 M for picks 16-30. That makes sense to me given the tremendous bust rate for those picks. The averages get skewed upward from the very few stars that come out of the draft.

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        • RC says:

          “That article is very flawed because they don’t take into account development costs, ”

          Minor league players take almost nothing to develop. Its really astounding how little is spent on the minor leagues.

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    • Johnnytwotimes says:

      I absolutely agree with this. Draft picks are worth far more than this article says. There is no way at all to get that slot money back once you lose it. Teams value 2 mil in draft money at way more than 6 mil on the open market. That 2 mil might get you a front of the rotation starter or first division starter for 6 years.

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      • stan says:

        That draft pick has about a 20% chance of getting you a solid starter for 6 years. The chances of getting a “front of the rotation” or “first division” starter are even less, of course.

        It was only a few years ago that the MLB draft was considered a pointless exercise and draft pick compensation was reviled as being “nothing” when small market teams got only a pick or two after losing free agents to big market teams.

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      • pft says:

        Slot money for later round picks is not very important. Most of the slot money is used for a pick that they no longer have. Usually nothing much worth spending over slot at #50 or higher. Slot money may be more valuable for picks 1-15, but picks 1-10 are protected

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  10. TangoAlphaLima says:

    Dave, I may be an idiot, but I’m kinda confused by this article. Are you only focusing on the reduction in draft pool amount? As opposed to also including the value of the actual pick? The value of the average player taken in the first round is generally worth far more than the value of the allocated draft pool amount for signing said player, is it not?

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    • indyralph says:

      This was my initial reaction as well. The best response that I can come up with is that the 2.4X multiplier, or 3X if you prefer, is taking into account all the appropriate probabilities of recognizing that extra value. I’m skeptical, like stan above, that the one transaction is indicative of a market. But I also have nothing better to go on than this “In conversations with people in MLB front offices, the general consensus has ranged around a 3X valuation for draft pick dollars”.

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    • LHPSU says:

      Yes, you would think that’s the main thing. Dan Szymborski estimates the No. 45 pick to be at 2.9 WAR and the No. 75 pick at around 1.6 WAR. Essentially, anything in the first two round are worth as much as (or more than) any of these free agents are in one year. Of course there’s value in getting those wins in a single year and these numbers are merely averages with any number of possible outcomes (including wins contributed to another team), but this is a huge disincentive for teams to sign a player to 1 year, because with a multi-year deal you are at least reaping the production of several seasons.

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      • stan says:

        Yes, the No. 45 pick is worth around 2.9 WAR, and the No. 75 pick is worth around 1.6 WAR. However that number is for the player’s entire career, and its not like those players are playing for free for that time or that they earned those WAR for their original team after it held their rights. We’re talking about a utility infielder or middle reliever on average here. Those are guys you could easily get for nothing from non-roster invitees playing for a minimum salary.

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        • LHPSU says:

          I think it’s reasonable to say that the actual worth of the pick with the drafting team is half that number, since the draft picks that do make the major leagues usually contribute a significant portion of their career WAR in their team-controlled years. You’re still looking at the No. 45 pick breaking even with Nelson Cruz and Kendry Morales in terms of career WAR with the team on a 1-year deal.

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        • stan says:

          Just look at the players from the 2007 MLB draft:

          http://en.wikipedia.org/wiki/2007_Major_League_Baseball_Draft

          Would losing a chance at these guy stop you from signing a Drew or Santana to Jimenez/ Cruz type contract if your team really needed them? (keeping in mind that the top 10 are off limits).

          Your opportunity cost here is a 1/20 chance at an all-star (Heyward) plus a 3/20 chance at a solid starter (Revere, Porcello and Mesoraco). That’s not even taking into account that Porcello was a special case who fell due to signing bonus demands. Withrow is going to be a good set-up man, nothing more. Arencibia is a good bench piece, and the rest of these guys are completely forgettable. We’re talking about a lottery ticket with these picks, and one that’s highly unlikely to pay off. I reject the old notion that they are “nothing” but the position here that they are worth more than a couple million dollars on the open market is equally ridiculous.

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        • TangoAlphaLima says:

          Szymborski’s WAR numbers are for the entire career? Not just for the 6 years of control?

          Regardless, a high 1st round pick, like the ones the Rockies, Mariners, or Blue Jays would have to give up is prospectively worth a lot more WAR than what the #45 or #75 pick should offer.

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        • indyralph says:

          I’m not sure that I buy the argument that you can simply rely on the average. For one thing, a 2.9 total WAR player or less does cost you virtually nothing. They get paid the minimum salary and then become non-tenders. So the average player still has a surplus market value of roughly $18M. Anybody who accrues more than the average 2.9 WAR will begin to accrue significant surplus value.

          The free agent on the other hand could post, as an extreme example, zero WAR and have a contract that is entirely negative surplus value. Earning surplus value on a free agent contract is significantly more difficult. I’m just not sure you can compare the averages without accounting for the relative probability distributions.

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        • stan says:

          @TAL- remember, those teams have protected picks. They are not in this discussion. The value of a first round pick in the top 10 is of course much higher, but its not relevant here.

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        • Travis L says:

          @indyralph I generally agree with your point, but the league minimum for 6 years would be nearly $3 million. And with 2 years of arb raises in there, I think those guys are probably going to cost closer to $6 million.

          I think your point still is relevant, but league minimum != nothing.

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        • TangoAlphaLima says:

          @stan – Okay, then what about the value of picks 11-20? It certainly can’t be much less than that of the top 10. The point being that teams give up an amateur player worth potentially significant WAR as well as lose a portion of their draft pool allocation money.

          Also, do you know if Szymborski’s WAR projections are for the 6 years of control or for the entire career? Potentially a big difference there.

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        • Dan says:

          The draft pick also costs money in terms of a signing bonus. That bonus money has present value. The 2.9 WAR average does not necessarily mean their is surplus value of a player, because that depends on how many seasons the WAR is accrued over versus salaries paid. Even if there is surplus value on a 2.9 WAR player, that doesn’t mean that the surplus value discounted to today is greater than the bonus dollars paid to the draft pick.

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        • indyralph says:

          Boy, you guys are picky. Unless you’re willing to forfeit a roster spot, there is no marginal cost to paying an above replacement level player the minimum salary. You’d be paying the replacement player the same amount. There is a bonus of a little over a $1M on the 45th pick – that is real money. I used a rough $6M per win to be conservative in the other direction.

          The point remains this: the draft pick has a very low chance of negative surplus value. A free agent paid based on their mean projections has a roughly 50% chance of negative surplus value. I don’t think you can ignore how risk averse many teams are.

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      • pft says:

        Those are the averages heavily skewed by the rare star. The median is much less

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    • jacaissie says:

      I had that question, too, but here is how I resolved it: there is a “market” for draft talent, and since there are limited draft dollars available to spend, it’s a deflated market. That said, it is a market just the same. Teams still pass on players because of signability concerns, not talent. So a guy who signs for $2 million is probably worth $6 million in actual value–and that is reflected in what teams are willing to give up in a real dollar-draft dollar exchange. Thus, draft dollars (or their conversion to real dollars) is a decent proxy for actual value. Or that’s how I resolved it. Dave, I’d be interested in your own elaboration, too.

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      • TangoAlphaLima says:

        Certainly, that can be a factor. Top tier talent can drop due to signability issues. But I don’t think that’s as big of a factor now with the allocated draft pool money as it used to be, when the market was totally open and Scott Boras could make outrageous signing bonus demands to force his clients to big market teams.

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  11. Jengajam says:

    One thing worth considering is the effect the threat of a post-draft signing has on a player’s old team. For example, if the Red Sox know that Stephen Drew won’t give them another draft pick if he signs with another team, they have no reason to let their QO get in the way of resigning him, which would allow Drew to be paid for a full season without having to take to much of a discount.

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  12. vivalajeter says:

    One other thing to consider is that you don’t become a GM without having some sense of arrogance (in a good way). The #15 in the draft might only average 10 WAR for their career (I’m making that number up) – but if you have the #15 pick in the draft, do you really think like that? Or do you think that you’re smarter than the rest, and your guy will be the star rather than the dud.

    As fans, we certainly think like that. “In 3 years, our rotation will have (#1 prospect), (#3 prospect) and (#7 prospect)!” as if they’re going to reach their potential. I don’t see GMs looking at these picks as 20% chance of panning out, and 80% chance of never making the majors.

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    • stan says:

      I think a GM would have an equal amount of arrogance in thinking that he made a great pick-up in the short term with a Drew/ Santana (Notice I omit Morales from the entire conversation. He was given a gift with the QO but was too stupid to take it). As I stated earlier, it was only a few years ago that most of these same GMs tossed away draft picks like they were nothing if they were from big market teams.

      I should add that those GMs used to be able to buy talented players on the international market or who fell in the draft due to signing bonus demands, so they knew they were getting a couple of first round talents every year regardless of where they actually picked in the draft.

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    • pft says:

      The average 1t 15 is a bit over 4 WAR (career). Only 16% have had a career WAR over 10. I think teams are aware picks at this level are pretty much a lottery ticket. You are almost as likely to hit the lottery in the 2nd round (not quite, about half as likely), but half of improbable is not much worse than improbable, and look at the bonus money you saved

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      • dl80 says:

        I don’t think I buy that, though. If every team realized almost every pick after 5-10 is a lottery ticket, they wouldn’t be offering QO offers to players desperately hoping said players (Cruz, Morales, etc.) don’t accept.

        I don’t think there is any way that the Mariners wanted Morales to take $14m.

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      • RC says:

        Thats silly.

        4 WAR is still 25M at this point. Even if we cut that in half to 2 WAR, and 12M, there’s almost no way that any of the free agents we’re talking about can make up -12M in value.

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  13. Todd Roberts says:

    So how likely is it that next season we see guys finally accept a QO?

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    • Nathaniel Dawson says:

      The likelihood will be in inverse proportion to the likelihood that teams will get wiser in giving out QO’s.

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      • stan says:

        The only team that was unwise in handing out a QO was the Mariners, who did so only because they were desperate for hitting. Is there a team that didn’t actually want the player back at 1 yr/ $14M this offseason? I can’t think of one.

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        • dl80 says:

          Stan,
          The Ranger had to know that Nelson Cruz was not worth $14 million. He hasn’t been worth anywhere close to that (even with today’s inflation values) in 3 years: 1.3 WAR, 1.1, 1.5. That’s in 3 relatively full seasons and with a PED suspension in the immediate rear view. Even at $6m per win, he’s worth at most $9-11 m.

          Unless you think one of the following: 1) The Rangers don’t realize how much his defense and position drag down his value; 2) The Rangers don’t care about the extra $5m wasted; 3) WAR is significantly undervaluing Cruz; 4) Cruz is going to rebound to 2010s offensive and defensive numbers.

          I guess 1 is possible, but I doubt it. 2 may be possible, as well since the Rangers took on a big chunk of salary with Fielder. 3 would be more likely if it wasn’t 3 straight years of the same value. 4 is way less likely than any lottery ticket.

          I do agree that most of the teams that gave QOs would have been happy to have the player back at $14m for one year: Beltran, Cano, Choo, Ellsbury, Kuroda, Jimenez (I guess? the Indians are getting cheap again), McCann, Napoli.

          I’m not as sure about Granderson, Drew, Morales, or Santana.

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  14. pft says:

    It makes no sense if a player is only looking for a 1 yr deal. It makes all the sense in the world if the player seeks a 3-4 yr deal. Neither Drew or Santanna have a 3-4 yr deal on the table, maybe one of the teams who are most resistant to giving up a pick will be interested w/o draft pick compensation, especially once SP’ers start going down with injuries (and 40% due each year)

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  15. Blair R. says:

    Would it be legal for Santana to spread his hypothetical 4 year 50m salary out 2,15,16,17 over the 4 years and only lose 40% of the 2m, 800k, by waiting to sign after the draft?
    If possible he would miss out on 800k, but increase his value by millions by signing after the draft.

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    • Kicker31 says:

      What incentive would the team have to do such a thing? Essentially, the team would have to agree that Santana is a 3/$48M player from 2015-2017, which nobody thinks he is (or he’d be getting 4/$64M). Not only would the team be deferring money back to later years which have higher uncertainty, but they’d also be paying more. For something to work, it’d probably have to be:

      5-10-12-13. So they could get him on a 3/$35M deal, and he gets the lesser proration (if that’s legal).

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      • Barney Coolio says:

        Yeah, well, no team thinks Santana is worth $2mm for 2014 either. Everybody thinks he is worth more, so getting a massive discount for 2014 makes it worth it to overpay for 2015-2017. Paying more money for later years has a slight benefit to a team due to inflation. $17mm is worth less in 2017 than it is in 2014, so backloading the contract benefits the team. However, the higher salaries in the later years makes trading the player more difficult.

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  16. Alan says:

    Wins aren’t valued equally throughout the year. In June, when a team has more information about how close it is to the periphery of the playoffs, an extra win or two becomes especially valuable. This is especially so because wins are harder to find at that time. Accordingly, if a team has a need in June, it will bid more per win than teams would at the beginning of the season. The premium it is willing to pay might be enough to compensate for fewer overall wins it would be receiving. Imagine the price a team tied for the division lead would pay for a free agent dominant pitcher at the end of August. It would be a lot more than 1/6 of the salary the free agent pitcher would have gotten at the beginning of the season. How much of a financial hit would a dominant starting pitcher actually take if he went year to year and only signed on August 31st every year?

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    • Kicker31 says:

      I would probably say that there’s a significant drop off in salary from March to May, where the wins aren’t “certainly” needed yet, but the team is getting less time with the player. From June to July, his value probably only takes a slight hit as the trade deadline nears. After the deadline, I’d say he could make more on August 10 than July 30.

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  17. Bronnt says:

    NOTgraphs companion article: The Pointlessness of Singing After the Draught.

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  18. skmd says:

    I’m not seeing the basic premise of this article, i hope someone can clarify it for me: IFA draft pool money can be traded because those draft slots can be traded. The Dodgers example uses IFA pool money to illustrate that point. But amateur draft slots can’t be traded (except for competitive draft picks) – so how does a team acquire draft money without acquiring the draft slot to go with it?

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    • Kicker31 says:

      Acquiring the slot doesn’t mean the team has to pay someone. They can bump all their other players up a round, and then sign a guy for $10k in the future.

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    • Nathaniel Dawson says:

      Teams do lose or gain amateur draft slots, through the free agent compensation process. While they can’t be traded per se, it amounts to that when a QO free agent signs with another team. A pick is forfeited by one team, and a pick is awarded to another.

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  19. noseeum says:

    On an individual basis, I would say you are right, Dave, but if I were the players’ union, I would urge these guys to wait. It will most definitely hurt them individually, but there is no better way to make sure this ridiculous draft pick compensation rule gets dropped than to have a bunch of teams miss out on 40% of a season from valuable players because of the rule.

    It would be nice if the players’ union were able to be explicit about this and be able to support the individual players in this decision. Why not tell Stephen Drew the union will give him $2 million to wait until after the draft? Is there anything illegal about that? There shouldn’t be!

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  20. Johnny Ringo says:

    I guess I don’t get the logic. If I was a GM, and could sign a guy in June, and not give up a draft pick, and maybe give some extra time to some other guys to impress or work the kinks out, isn’t that a good deal for many clubs?

    Does it not (more than likely) expand the market for the free agents a couple of months from the start of the season?

    No matter how teams valuate high draft picks, most are not going to just “give them away” for the chance to save 5 million or so.

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    • noseeum says:

      Because a player who can help your team is more valuable for a full season than half a season. If you had guys you thought you could rely on, you wouldn’t be interested in him in the first place.

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      • John Wayne says:

        Most teams already have a starting 5 headed into Spring Training. Come June more teams will be scouring the trade market for pitching help, due to injuries and whatnot. Some surprise teams might be contending and enter the bidding war. Santana would be lucky to get 4 years/$45 Million now, but he might get 6 years/$75 Million come June.

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  21. Atreyu Jones says:

    “No matter how teams valuate high draft picks, most are not going to just “give them away” for the chance to save 5 million or so.”

    If they value a pick at less than $5 million, why on earth wouldn’t a team give it away in order to save $5 million?

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  22. John Wayne says:

    Seems like the market would be better in June. More than a few contending teams will be looking for help come trade deadline, due to injuries or skill decline. Not having to trade any prospects or lose any draft picks for that player could start a bidding frenzy, much like there was for International Free Agents like Masahiro Tanaka. Waiting could turn out best for the team and the player.

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